On June 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13 - Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which has previously been referred to as the current expected credit loss (CECL) model.
ASU 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles, and instead reflects an organization's current estimate of all expected credit losses over the contractual term of its financial assets. Upon adoption, the ASU will require a company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Companies such as financial institutions and other organizations will be required to use forward-looking information to better inform their credit loss estimates. The ASU also will require financial statement disclosures to be enhanced regarding estimates used in calculating credit losses.
For those public companies who file with the United States Securities and Exchange Commission (SEC), the ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For public business entities that are not SEC filers, the ASU on credit losses will take effect for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For privately held companies, ASU 2016-13 will take effect for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021.
The complete text of the ASU, as well as other information related to the FASB release, is available here.